The Coca-Cola Company Earnings: Will They Ever Grow Again?

On Tuesday, Coca-Cola (NYSE: KO) will release its quarterly report, and investors are preparing themselves for the potential disappointment of falling sales and earnings. Even though rival PepsiCo (NYSE: PEP) could likely see the same headwinds hold back its growth, Coca-Cola still needs to address the key threat to its dominance that energy drinks and other competitors present. In that light, investors want to know if Coca-Cola's new partnership with Keurig Green Mountain (NASDAQ: GMCR) could finally reawaken growth.

For a century, Coca-Cola has grown its carbonated beverage business into a global behemoth, reaching every corner of the planet with its distinctive red cans and promise of simple luxury. Yet recently, health concerns have weighed on its growth, and although Coca-Cola has made it through past troubles before, this time has presented a bigger challenge for the beverage giant to overcome. Without the snack business that PepsiCo has to give it added diversification with its beverage division, can Coca-Cola get back on a growth path in the future? Let's take an early look at what's been happening with Coca-Cola over the past quarter and what we're likely to see in its report.

Stats on Coca-Cola

Analyst EPS Estimate

$0.44

Change From Year-Ago EPS

(4.3%)

Revenue Estimate

$10.56 billion

Change From Year-Ago Revenue

(4.3%)

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

What's next for Coca-Cola earnings?In recent months, analysts have gotten a lot more pessimistic about Coca-Cola earnings, cutting a nickel -- or more than 10% -- from their first-quarter estimates and almost triple that from their full-year 2014 projections. The stock has also struggled, falling 2% since early January.

Coca-Cola's fourth-quarter earnings report showed many of the problems that the beverage giant has had in keeping its business moving forward. Revenue fell by 4%, pushing earnings down by 3% compared to the year-ago quarter. Although currency effects hurt Coca-Cola's results, the company managed to grow sales volume worldwide by just 1%. Those results were similar to what PepsiCo saw in its beverage business, although PepsiCo's snack division helped boost its overall performance.

But the huge news for Coca-Cola over the quarter was its decision to enter a major strategic partnership with Keurig Green Mountain. Coca-Cola will work with Keurig Green Mountain for 10 years, taking a 10% stake in the maker of the Keurig single-brew coffee machine and potentially giving credence to the Keurig Cold concept -- a home-soda maker that could supplant other players in that arena and further bolster Keurig Green Mountain's reputation. For Coca-Cola, the hope is that home-availability of its beverages will help it grow its overall sales again.

The question, though, is whether anyone will actually want to drink Coca-Cola products. Sales of diet sodas in particular plunged last year, forcing Coca-Cola to reemphasize sports drinks, tea, and other non-carbonated beverages. Studies finding a correlation between diet drinks and higher rates of heart attack and other complications certainly haven't helped Coca-Cola's reputation, even though the studies left open the possibility that those who drink diet soda engage in other behavior that adversely affects their health.

From a broader perspective, Coca-Cola still has ambitious plans in its 2020 Vision. With hopes of boosting the amount of beverages it sells to customers to 3 billion servings per day, Coca-Cola needs to figure out how to use its extensive marketing and distribution advantages to give customers what they want -- or persuade those customers that its products are the most desirable.

In the Coca-Cola earnings report, watch to see how the company expects to move forward with Keurig Green Mountain while also leaving room for its own organic growth. If Coca-Cola can get beyond its current crisis of confidence, it could go a long way toward returning the stock price to higher levels.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Keurig Green Mountain. It recommends and owns shares of Coca-Cola and PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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